Property Insurance
Industrial All Risk (IAR) Insurance
Industrial All Risk (IAR) Insurance is a comprehensive policy designed to provide wide-ranging protection to large-scale industrial units, manufacturing plants, and commercial establishments. It covers property damage, machinery breakdown, and business interruption under a single policy, reducing the need for multiple separate covers.
Why is Industrial All Risk (IAR) Insurance Essential?
- Comprehensive Protection Under One Policy
- Protection Against Unforeseen Catastrophic Losses
- Safeguards Business Continuity
- Covers Machinery Breakdown
- Essential for Large Industrial Setups
- Customizable Add-On Covers
- Compliance with Lender & Regulatory Requirements
- Cost-Effective Alternative to Multiple Policies
- Protection Against Third-Party Liabilities
- Peace of Mind & Long-Term Business Security
Important Things You Should Note
- Minimum Sum Insured Requirement – IAR Insurance is generally offered to businesses with high-value assets (usually ₹50 crore and above).
- Covers Both Material Damage & Business Interruption – Unlike Standard Fire & Special Perils Insurance, IAR extends to loss of profits due to operational halts.
- Comprehensive, But Not Absolute Coverage – Some risks (e.g., cyber risks, war, pollution) may require separate policies.
- Policy Exclusions Vary by Insurer – Each insurer has its own list of exclusions, so policy wording must be reviewed carefully.
- Premium is Based on Risk Assessment – Factors like industry type, location, machinery age, fire safety measures, and claims history impact premium rates.
- Mandatory Safety & Maintenance Measures – Many insurers require compliance with fire safety, workplace safety, and maintenance standards.
- Claim Settlement May Require Business Interruption Documentation – For business loss claims, companies must provide revenue statements, production records, and financial proof of income loss.
What is Covered & What is Not Covered?
What is Covered?
Material Damage (Property & Assets)
Fire, explosion, lightning
Natural disasters – Earthquake, flood, cyclone, storm, landslide
Theft & burglary
Malicious damage, riot, strike
Impact damage by vehicles or falling objects
Machinery breakdown
Accidental damage to property
Business Interruption (Loss of Profit) Coverage
Covers loss of income due to operational shutdown from an insured peril Compensation for fixed expenses, employee salaries, and loan repayments Can include increased cost of working (ICOW) to continue operations
Machinery Breakdown Coverage
Covers sudden and unforeseen mechanical/electrical failures Includes repair or replacement costs
Additional Covers Available (Optional Add-Ons)
- Terrorism Cover – Protection against damages from terrorist acts
- Escalation Clause – To cover increased repair/replacement costs due to inflation
- Debris Removal – Covers the cost of clearing damaged materials after an incident
- Professional Fees Cover – Covers consultant/engineer costs for damage assessment
- Increased Cost of Working (ICOW) – Covers additional expenses to minimize downtime
What is Not Covered (Exclusions)?
- War & Nuclear Risks – Damages caused by war, invasion, or nuclear radiation.
- Cyber Risks – Data breaches, hacking, or cyber-related financial losses (requires Cyber Insurance).
- Gradual Wear & Tear – Depreciation, rust, corrosion, or maintenance-related damage.
- Wilful Negligence or Intentional Damage – Any intentional or fraudulent act leading to damage.
- Pollution & Contamination – Losses due to pollution unless resulting from an insured peril.
- Losses from Uninsured Perils – Any risk not explicitly covered under the policy (e.g., political risks, pandemic-related business shutdowns).
- Consequential Losses (Unless Business Interruption Cover is Taken) – Losses that arise as an indirect effect of an incident.
FAQs
Who should buy Industrial All Risk (IAR) Insurance?
IAR Insurance is ideal for large industrial units, manufacturing plants, refineries, power plants, and businesses with high-value assets (usually ₹50 crore and above). It offers comprehensive protection against property damage, machinery breakdown, and business interruption.
How is Industrial All Risk (IAR) different from Standard Fire and Special Perils Insurance?
While Standard Fire and Special Perils Insurance covers only property damage due to fire, natural disasters, and related risks, IAR Insurance is more comprehensive. It includes fire, burglary, natural calamities, machinery breakdown, and business interruption losses under a single policy.
Does IAR Insurance cover loss of income due to business interruption?
Yes, IAR Insurance provides Business Interruption (Loss of Profit) Cover, which compensates for loss of income and fixed expenses when operations are halted due to an insured peril.
What factors affect the premium of an Industrial All Risk (IAR) policy?
The premium is based on:
- Industry type and risk exposure (e.g., chemical plants have higher risks than textile factories)
- Sum insured and asset value
- Location and susceptibility to natural disasters
- Fire safety and security measures in place
- Claims history and past losses
Can I customize the coverage with add-ons?
Yes, insurers offer various optional covers such as:
- Terrorism Cover
- Escalation Clause (to cover inflation-related cost increases)
- Debris Removal
- Professional Fees Cover (for expert assessments)
- Increased Cost of Working (ICOW) (to minimize operational downtime)
